Switzerland GDP Q3 2016

Switzerland: Economy remains flat in Q3

December 2, 2016

Switzerland’s economy stagnated in the third quarter. The export-reliant economy has been struggling from the effects of a strong Swiss franc, which serves as a safe haven in financial markets when global uncertainty mounts.

GDP growth was flat in Q3 in seasonally-adjusted quarterly terms, as the State Secretariat for Economic Affairs (SECO) reported on 2 December. The result came in below the 0.6% expansion seen in Q2 and undershot market expectations of a 0.3% increase. The slowdown was driven by feeble private and government consumption as well as subdued exports. Compared to the same quarter last year, GDP rose 1.3%, which was below Q2’s 2.0% annual growth.

Domestic demand was sluggish in Q3. Private consumption, the largest contributor to GDP growth, grew a feeble 0.1%, yet this was above the flat reading seen in the second quarter. Government consumption in turn lost steam and contracted 0.1% in Q3, which was the worst result in ten quarters (Q2: +1.7% quarter-on-quarter). Fixed investment rebounded and rose a timid 0.5% in Q3, which contrasted the 0.6% drop observed in the previous quarter.

On the external side of the economy, exports of goods and services stalled from the previous quarter, which was a deterioration from Q2’s healthy 5.3% increase. Imports fell at a softer rate, dropping 1.7% in the third quarter (Q2: -2.7% qoq). As a result, the external sector’s net contribution to growth deteriorated remarkably from a 5.3 percentage-point contribution in Q2 to a 1.0 percentage-point contribution in Q3.

The SECO expects GDP to expand 1.5% in 2016. For 2017, SECO sees economic activity strengthening and expects GDP to expand 1.8%. Meanwhile, the Swiss National Bank expects economic growth of 1.5% in 2016. FocusEconomics Consensus Forecast panelists expect GDP to expand 1.4% in 2016, which is unchanged from last month’s projection. For 2017, the panel expects economic growth to accelerate to 1.5%, which is also unchanged from last month’s Consensus.

The KOF economic barometer—a leading composite indicator for the Swiss economy forecasting a six-month period—declined in August to 104.1, down from an upward-revised 108.0 in July (previously reported: 106.8).